Reversing a ruling made earlier this year, HCFA has decided that referrals by hospital-employed physicians to hospital-owned home health agencies won't break self-referral laws.
HCFA's move doesn't completely exonerate hospitals, however. HCFA said it intends to revisit the issue when the next round of self-referral regulations are released, which could be as early as next year.
Those regulations would implement the so-called "Stark II" legislation, which Congress passed in 1993. The law, introduced by Rep. Fortney "Pete" Stark (D-Calif.), bars physicians from referring patients to 11 kinds of healthcare facilities or services in which they have an ownership interest. Home-care services are one of the 11.
Hearing of the agency's reversal, an aide to Stark said the congressman was "very disappointed" with HFCA's decision. The aide said Stark believes the referral patterns by hospital-employed physicians deserve further scrutiny. In September, Stark introduced legislation that would require hospitals to inform patients of alternative home-care arrangements.
Earlier this year, HCFA said it would treat all home-care services equally, meaning referrals by hospital-employed physicians to the hospital's own home-care agency would violate the Stark II law.
The American Hospital Association argued that the Stark II law should include an exemption for hospital physicians referring to hospital-owned home-care agencies because the physicians don't have a financial stake in the agencies. Without the exemption, the law would be a barrier to hospitals wanting to form integrated delivery systems, the AHA said. The AHA then led the fight to overturn HCFA's interpretation of the law.
Last week, HCFA temporarily acquiesced. An HHS official said the decision by HCFA amounts to a moratorium on enforcing the law as it pertains to hospital home-care agencies. The policy would stay in effect until the Stark II regulations are final, the official said.
The losers for now are operators of freestanding home health agencies, which supported HCFA's ruling and original interpretation of the law. The freestanding centers say hospitals misuse their own home health agencies, skimming the best patients and collecting the cost-based reimbursements for home healthcare while referring only the sickest patients to outside facilities.
Earlier this year, HHS' inspector general's office said it would investigate whether hospitals are improperly referring patients to their own downstream provider companies in order to maximize Medicare reimbursements.
AHA Executive Vice President James Bentley said nearly half of all hospitals now have some interest in a home health agency. But he said the AHA doesn't have data on how many referrals hospital-employed physicians make to those facilities.